stock charts

Stock Charts - An Introduction

When looking at stock charts in the past, have you ever wondered what the heck those lines and shapes were (or are)? .....If so, you've come to the right place. Stock charts are used to show a stocks' past performance and to help predict its future path by using technical indicators, different theories and analyzing different time frames. This technique is called "Technical Analysis".
There are different types of charts used for Technical Analysis, and each type can be used for different reasons depending on your knowledge of each one.
In this section I will briefly go over some of the most common types of stock market charts.
Note: You can click on each image for a larger view, and follow my links to further descriptions and examples.

Line Chart

A Line chart plots the closing price of a stock only.
Find out more about Line Charts here: Line Chart

Bar Chart

A Bar Chart is used to plot the closing price; the price range; and
sometimes the opening price; of a stock over a specified time frame.

Find out more about Bar Charts here: Bar Chart

Candlestick Chart

This is an example of a Candlestick Chart. This type is a form of Japanese charting that started many years ago. Understanding candlestick charting involves taking an in depth look.
Find out more information on Candlestick Charts here: Candlestick Chart

Point and Figure Chart

Point and Figure Chart courtesy of StockCharts.com

Point and Figure charts consist of vertical columns showing a rise in prices by displaying black "X's" and showing a decline in prices by showing red "O's".
You can find out more about Point and Figure Charts here: Point and Figure Charts

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Some traders, and those who have an online finance degree, use basic charts during their technical analysis and trade using support and resistance levels. Others use one, or a combination of technical indicators and different types of stock charts before placing any trades.
I find that the more I look at the same type of chart, the more I can recognize patterns that I have seen before. This is very helpful when trying to figure out when a good time to buy or sell is.
Over the years I have made a habit of printing out stock charts with patterns that I thought were going to happen in the future, based on patterns that I have seen in the past. I place marks and lines on the charts to show where I think a reversal or a continuing trend will occur.
After a few months go by, I go through my stock of charts, and check where the stocks wound up going. You wouldn't believe how many of them went exactly where the charts showed they would go, based on what I had written down. And yes, I always say "I should have listened to myself". You know the old saying: I "Would of, Could of and Should of"?
You don't have to remind me though, because my wife and children are always doing that. They know because I always start out telling them stories with "You're not going to believe this......" and they say, "What didn't you buy this time", or "What happened right after you sold......".
It doesn't matter which chart you choose or like better than the other, the key is to learn about the one that fits your trading style and needs, and to study it as much as possible.

elliot wave

 The Elliott Wave Principle

In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery "The Elliott Wave Principle," and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.
Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott's work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost's forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.
When investors and traders first discover the Elliott Wave Principle, there are several reactions:

• Disbelief – that markets are patterned and largely predictable by technical analysis alone
• Joyous “irrational exuberance” – at having found a “crystal ball” to foretell the future
• And finally the correct, and useful response – “Wow, here is a valuable new tool I should learn to use.”

Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature’s patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions… and – as recent discoveries have confirmed – in market prices. 
Natural systems, including Elliott wave patterns in market charts, “grow” through time, and their forms are defined by interruptions to that growth.
Here's what is meant by that. When your hands formed in the womb, they first looked like round paddles growing equally in all directions. Then, in the places between your fingers, cells ceased growing or died, and growth was directed to the five digits. This structured progress and regress is essential to all forms of growth. That this “punctuated growth” appears in market data is only natural – as Robert Prechter, Jr., the world's foremost Elliott wave expert and president of Elliott Wave International, says, “Everything that thrives must have setbacks.”
The first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: “impulse waves,” and “corrective waves.”
Impulse waves are composed of five sub-waves and move in the same direction as the trend of the next larger size (labeled as 1, 2, 3, 4, 5). Impulse waves are called so because they powerfully impel the market.
A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size (labeled as a, b, c). Corrective waves accomplish only a partial retracement, or "correction," of the progress achieved by any preceding impulse wave.
As the figure above shows, one complete Elliott wave consists of eight waves and two phases: five-wave impulse phase, whose sub-waves are denoted by numbers, and the three-wave corrective phase, whose sub-waves are denoted by letters.
What R.N. Elliott set out to describe using the Elliott Wave Principle was how the market actually behaves. There are a number of specific variations on the underlying theme, which Elliott meticulously described and illustrated. He also noted the important fact that each pattern has identifiable requirements as well as tendencies. From these observations, he was able to formulate numerous rules and guidelines for proper wave identification. A thorough knowledge of such details is necessary to understand what the markets can do, and at least as important, what it does not do.